According to a CRISIL report, cotton yarn spinners are staring at a 200-400 basis points (bps) margin squeeze in FY20. The report further suggests that mid and small-sized spinners are likely to be impacted the most.
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Anuj Sethi, senior director of CRISIL, said, "It has been a difficult year for cotton spinners so far. But, we expect the trend to turnaround a bit with cotton prices beginning to ease. This is following anticipation of better cotton crop in this cotton season, which has started from October and will go on until February of next year. That will bring down the cotton prices by about 10-15 percent from Rs 126 per kilogram which we saw on an average last year. This will help cotton spinners achieve parity with international prices."
Dinesh Nolkha, managing director of Nitin Spinners, said, "Now things are improving. In the second half, they are on the mend. We are seeing an improvement in the offtake. Also, the offtake from China has improved in the last quarter and we expect it to improve in the coming quarters."
"Overall, the margins have gone down by about 400-450 bps which should recover back in the quarter which is going to come. This is a phenomenon which happens once in five-six years in our industry and it is something which is extraordinary for our industry as such," Nolkha noted.